Bonus on Endowments

These bonuses are declared annually as cash values computed as percentages of the basic sum assured and of bonuses declared in previous years. Once granted, these bonuses are guaranteed, cannot be withdrawn and are also known as attaching bonuses. This is the figure normally required when selling endowment policy

Special Bonuses - These are one-off bonuses, granted at the discretion of the life company and are also guaranteed. For example, if a friendly society converts to a public company they may grant such special bonuses to each policy in force, instead of issuing free shares in the new company.

Terminal Bonuses - Most life companies currently grant an additional bonus at the end of the life of a policy. In essence this is a loyalty bonus designed to encourage the policy holders to keep the policies in force until the maturity date. The size of the terminal bonus is dependent upon the investment conditions prevailing at the time of maturity, as well as upon the investment performance of the life company. Although it can be a large part of the final sum paid out, it is not guaranteed.

Bonuses issued by any life company are dependent upon its financial strength which, in turn, relies heavily on its investment performance. It is in the interests of the life companies to even out the vagaries of the investment environment, by declaring bonuses which are reasonably consistent. However, bonuses may be increased or decreased from year to year, thereby affecting the final value of the underlying policy.